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Patently Obvious

by Doug Lichtman / April 18, 2011

Note: This blog entry is available in English only.

On Monday the Supreme Court will consider whether to fundamentally alter the way American patent law is litigated. Specifically, in the context of an otherwise unremarkable patent dispute, the Court has promised to decide the degree to which juries should be allowed to question whether a patent should have been issued at all.

It’s a critical issue: the current approach, under which juries are explicitly discouraged from questioning a patent’s validity, all too often means that dubious patents are nevertheless enforced. That inhibits innovation, the very thing that patent law is supposed to encourage.

A patent’s validity is first judged at the United States Patent and Trademark Office, where thousands of experts on everything from business practices to stereo equipment toil to evaluate every submitted application. It’s a herculean task: inventors have filed more than 450,000 applications every year since 2007; last year the number was close to 500,000. To accurately evaluate all of those purported inventions would cost tens of billions of dollars, multiples more than what the Patent Office receives in federal outlays or could plausibly raise on its own with application fees.

As a result, patent examiners give most applications only a quick look, spending on average 16 hours to 17 hours per application — nowhere near the time needed to assess whether an invention is truly new and not obvious. Worse, those hours are typically spread over two to three years, and they are interspersed with work on hundreds of other open files.

These problems could in theory be fixed with more money. But resources aren’t the only issue. The extent and quality of Patent Office review is also limited by the fact that the process is not adversarial. Indeed, the only parties involved in Patent Office review are the applicant and the applicant’s lawyers — people with an obvious incentive to see the application move forward. Contrast that with litigation, where patent plaintiffs have to square off against very motivated patent defendants.

Why, then, does the current system discourage juries from second-guessing the Patent Office? The primary reason is that judges are reluctant to invite lay jurors to overrule the experts. That makes sense in the abstract. But in practice, even the best examiners are so overwhelmed and so poorly informed that the benefits of their expertise are fully dissipated. Juries know less, true, but at least they get to see a complete evidentiary record and to hear arguments on both sides.

The consequences of misplaced Patent Office deference are significant. A patent holder whose patent covers a technology that was in fact obvious to the world has a strong incentive to sit quietly after the patent is issued. Other parties will inevitably come up with same idea on their own; when they do, the patent holder can threaten litigation and as a result extort cash from companies that neither knew of nor remotely benefited from the patent holder’s work. Indeed, a growing number of “patent trolls” employ this exact strategy today, using bad patents to literally tax legitimate business activity.

If the current approach were abandoned and juries were instead given real freedom to review patent validity, not much would change at the Patent Office. Examiners would still evaluate the validity of patent applications and document their views. And, in the event of litigation, those views would still be admissible in court. The key difference would be that the examiner’s view would then rise or fall on the merits, rather than enjoying substantial deference from the jury.

With this reform in place, the patent system would still protect genuine inventions. But it would also give relief to the countless businesses that today find themselves vulnerable to patents that shouldn’t have been issued in the first place. After all, reform is not just about helping patent holders. Patent reform is also about protecting companies of all stripes from a patent system that would otherwise dangerously overreach.